Crypto Tax Filing Austin

Whether you’re being audited due to your crypto, or your investments simply complicate the process, the aim is to verify that you filed your tax returns accurately and paid the appropriate amount.

Here’s how the cryptocurrency audit process works:

• The IRS will request records to support your tax return information. This may include paychecks, bank statements, and receipts for any expenses claimed.
• For a cryptocurrency audit, you must also provide a detailed report of your trading history for the years in question.
• The audit examiner's primary goal is to check if you reported correctly and paid the correct tax amount.
• Upon concluding your audit, they will determine the amount due. Collections won’t start immediately, and you can appeal. 
• If the IRS suspects you intentionally attempted to conceal funds or committed a tax crime, they may escalate to the Criminal Investigations Division or the Department of Justice for prosecution.

Common triggers for a cryptocurrency audit include:

• Failing to report crypto on your tax return
• Excluding specific exchanges or wallets from your return
• Miscalculating capital gains or ordinary income

Many digital asset exchanges report some details of your activity to the IRS. If your tax return doesn’t align, you may be flagged. This holds true even in case of losses or minimal gains.

As the IRS starts receiving Form 1099-DA from crypto exchanges, we anticipate cryptocurrency audits to surge.

A typical audit covers the past 3 years of tax returns. However, if the IRS suspects underreporting by at least 25%, they might review up to 6 years.

If you've held crypto for several years and haven't reported it accurately, this might apply to you.

For instance, in a crypto audit covering 2017, 2018, and 2019, if the IRS finds coins sold in 2017 were acquired in 2014 and not reported before 2017, they may investigate further for those years.

If the IRS suspects tax fraud, there's no statute of limitations; they can audit as far back as needed.

As mentioned earlier, most IRS examiners may not understand Bitcoin, let alone its reporting requirements. You need a tax lawyer who:

• Understands how to handle the audit process
• Can compile an accurate crypto tax report (even if keys are lost or an exchange no longer exists)
• Is well-versed in digital asset tax law to defend your reporting methods

A crypto tax report provides a meticulous account of every trade—complete with timestamps, initial purchase amount, and sale amount, used to compute capital gains or losses.

Further considerations include: Long-term and short-term gains taxed at different rates; some crypto regarded as income and reported separately.

Preparing a proper crypto tax report can be extensive and time-consuming. Don’t assume the IRS will accurately calculate what you owe!

We’ve assisted numerous clients in creating crypto tax reports for prior years, even if they lack complete records or have lost wallet access. We know the law thoroughly, enabling us to craft crypto tax reports that withstand stringent IRS scrutiny.

Many of our crypto clients haven’t reported due to fears of being unable to pay taxes on crypto gains.

What most people don’t realize is that the audit process solely focuses on assessing the amount owed. You do not have to settle your full tax bill immediately after the cryptocurrency audit is complete. 

You can set up a payment plan with the IRS. There’s virtually always a payment or resolution option that suits our clients and satisfies the IRS.

You can even contest your crypto audit findings! Our tax attorneys hold licenses for the US Tax Court, enabling appeals to the highest levels.